To The Moon?

THE BOTTOM LINE

Our outlook for new all-time highs did not take as long as expected to come to pass, nor did the stock market deliver a deep discount to put new cash to work, but it did confirm its trend higher by rallying on a bad employment number on Friday. The bad number was taken by investors as a sign that the Fed did not have to take any action to quell concerns about full employment contributing to rising inflation, or put at any political peril the president’s COVID recovery legislative agenda, which promises to pour even more gasoline on the raging fire, which is currently the stock market. These very positive expectations for the future will likely result in renewed assaults on new all-time highs in the days and weeks ahead, but not likely in a straight line of course.

At this point it would appear that a series of indicators are suggesting that only sharply rising interest rates, or an out of the blue and unforeseen international crisis causing instant uncertainty could cast a shadow on the raging bull stock market. “Sell in May and go away”, well perhaps not this year!

To The Moon?

Recent updates have been advising clients to expect new all-time highs, and some volatility. And, after a brief and shallow consolidation the price sprinted to new all-time highs on Friday after a bad unemployment number, and a series of both strategic and tactical supply and demand indicators broke higher erasing their recent negative divergences. This activity suggests the current leg up in the rally is extending powered by global liquidity with more to come expected by investors. Low interest rates, and an unprecedented increase in liquidity into the financial system, has overshadowed the normal concerns about bullish sentiment and overvaluation measurements touching, and exceeding historic levels recently, which in the past has coincided with major market tops. This is apparently an example of how “markets can remain irrational longer then investors can remain liquid”.

TATY   —   A REPRESENTATIVE OF A FAMILY OF STRATEGIC SUPPLY AND DEMAND INDICATORS

TATY is shown above in yellow in Snapshot-274 with the S&P-500 overlaid in red and blue candle chart format. Recent updates have been making the case that should TATY begin to oscillate with bottoms forming in the red zone, and tops near the blue zone surrounding the 160 level, then that would be a very positive development for the extension of the bull trend. The first half of that setup came into place recently as TATY pulled back into the red zone surrounding the 140 level, as the rally paused for a few days in a sideways consolidation. We shall see what the remainder of the spring and summer bring, but an assault on the blue zone at the 160 level would continue the positive development.

On the contrary, if TATY should paint out the steps in a “Big Chill” warning, which would likely take weeks, then historic levels of bullish sentiment, and over-valuation would remain a concern, especially if interest rates were to resume their rise offering investors an improving and competitive alternative to stocks. Inflation, rising interest rates, and uncertainty are the traditional enemies of bull markets, and bear close watching by investors. For the time being investors are only focused on unprecedented liquidity flowing into the stock market, even though the Democratic margin in the House and Senate is so thin one would think that passage of the president’s popular with the public, and highly stimulative legislative agenda would be a very heavy lift at best.

SAMMY   —   A REPRESENTATIVE OF A FAMILY OF TACTICAL SUPPLY AND DEMAND INDICATORS

SAMMY is shown in Screenshots 229 (above) and 230 (below) in weekly and daily format respectively with the S&P-500. I’ve left in place the negative and positive divergence lines shown in previous updates to illustrate how the surge in the price to new all-time highs also resulted in SAMMY surging higher as well. This is a positive development, and happened a bit sooner than we expected after the price consolidated for a shorter then expected period of time, and the consolidation was also more shallow than expected, both signs that there remains a liquidity driven continuous bid under the stock market. The bears are simply too impotent to take charge for any meaningful period of time.

Please stay safe!

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